SEC To Target Crypto Firms Acting As “Qualified Custodians” – Report

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The US Securities and Exchange Commission (SEC) is said to be planning to propose new rule changes this week that could affect the services crypto companies can offer their clients.

According to Feb. 14 Bloomberg reports, citing “people familiar with the matter,” the securities regulator is working on a draft proposal that would make it more difficult for crypto firms to hold digital assets on behalf of their clients as “eligible custodians.”

This, in turn, may affect the many hedge funds, private equity firms, and pension funds that work alongside these crypto companies.

According to what was cited, a five-member committee of the SEC will vote on February 3. 15 Whether the proposal moves to the next stage.

A majority vote — 3 votes out of 5 — would be needed for the rest of the SEC to formally vote on the proposal. If approved, the proposal will be amended with comments as necessary.

While the SEC has debated what it should be required to be a qualified cryptocurrency custodian since March 2019, people familiar with the matter said it’s not clear what specific changes the FSA is seeking.

In the event of completion, Bloomberg indicated that some crypto companies may have to move their customers’ digital asset holdings elsewhere.

The report added that these financial institutions may be subject to “surprise audits” related to their custodial relationships or other repercussions.

Related: The head of the Securities and Exchange Commission (SEC) issues a warning to cryptocurrency firms after taking action on the staking Kraken

News of the motion to vote comes on Wednesday, January 3rd. A Reuters 26 report indicated that the SEC will soon be following Wall Street investment advisors on how they offer cryptocurrency custody to their clients.

In recent days, the Securities and Exchange Commission (SEC) has been flattered by Paxos Trust – the issuer of the Binance USD (BUSD) stablecoin – which they believe has been issued as unregistered securities.

Paxos said they were ready to “litigate vigorously” if necessary.